Employees' Pension Scheme 2026 Introduced, Replacing Older Plans

The Employees' Pension Scheme 2026 has been introduced, replacing older pension plans. This new scheme maintains the existing pension calculation formula for subscribers. Pensionable salary is determined by the average of the last sixty months' earnings. Employees receive a minimum monthly pension of one thousand rupees. Service years are enhanced by two years for those with twenty or more years of contribution.

The central government has rolled out the Employees’ Pension Scheme (EPS), 2026. The new scheme that comes under the Code on Social Security, 2020, and replaces two important schemes- EPS-1995 and Employees' Family Pension Scheme, 1971. While the key purpose of the new scheme is to provide a monthly pension to its subscribers on completion of at least 10 years of service, the big question is- has it changed the way monthly EPS pension will be calculated? Will employees get a higher pension under the new scheme if they have completed 10-25 years of service?

Will EPS pension be calculated at different wage ceiling in the EPS 2026 scheme?

No! The EPS pension will be calculated at a wage ceiling of Rs 15,000 if you have not taken approval and contributed of EPS on a higher basic salary. Most of the EPF members go for EPS contribution only up to wage ceiling despite a higher basic salary. It means even if your basic salary and dearness allowance (DA) is Rs 25,000, your pensionable salary for EPS pension calculation will be considered as Rs 15,000.

Every EPS subscriber is assured of a minimum monthly pension Rs 1,000 even if their calculated pension as per their basic pay and service years is less than Rs 1,000.

These conditions remain the same under the EPS 2026 scheme as well.

The EPS pension amount is calculated as per a formula.

Has EPS pension calculation formula changed under the EPS 2026 scheme?

No! As per the EPS 2026 scheme notification, the pension calculation formula remains the same.

The EPS pension formula is-

Monthly EPS pension = (Pensionable salary × pensionable service) ÷ 70

Pensionable salary will continue to be the average monthly salary drawn during the last 60 months before exiting the pension fund.

What can be your estimated monthly EPS pension on completion of 10-25 years of service?

Let’s calculate the estimated monthly EPS pension at basic salaries of Rs 10,000-15,000 and 10-25 service years.

Monthly EPS pension at 10 years of service (Rs 10,000-Rs 15,000 pensionable salary)

Average basic pay

Service years

Estimated monthly EPS pension

₹ 10,000

10

₹ 1,429

₹ 11,000

10

₹ 1,571

₹ 12,000

10

₹ 1,714

₹ 13,000

10

₹ 1,857

₹ 14,000

10

₹ 2,000

₹ 15,000

10

₹ 2,143

Monthly EPS pension at 15 years of service (Rs 10,000-Rs 15,000 pensionable salary)

Average basic pay

Service years

Estimated monthly EPS pension

₹ 10,000

15

₹ 2,143

₹ 11,000

15

₹ 2,357

₹ 12,000

15

₹ 2,571

₹ 13,000

15

₹ 2,786

₹ 14,000

15

₹ 3,000

₹ 15,000

15

₹ 3,214

Monthly EPS pension at 20 years of service (Rs 10,000-Rs 15,000 pensionable salary)

At this stage, another important EPFO rule about service years will apply. According to it, if service years of an employee are 20 or more, they get a 2-year bonus with their service length. It means, if someone has completed 20 years of service, their service years for EPS pension calculation will be counted as 22 years. Similarly, if service years are 25, they will be counted as 27.

Average basic pay

Service years

Estimated monthly EPS pension

₹ 10,000

22

₹ 3,143

₹ 11,000

22

₹ 3,457

₹ 12,000

22

₹ 3,771

₹ 13,000

22

₹ 4,086

₹ 14,000

22

₹ 4,400

₹ 15,000

22

₹ 4,714

Monthly EPS pension at 25 years of service (Rs 10,000-Rs 15,000 pensionable salary)

If service years are 25, they will be counted as 27 as 2 bonus years will be added.

Average basic pay

Service years

Estimated monthly EPS pension

₹ 10,000

27

₹ 3,857

₹ 11,000

27

₹ 4,243

₹ 12,000

27

₹ 4,629

₹ 13,000

27

₹ 5,014

₹ 14,000

27

₹ 5,400

₹ 15,000

27

₹ 5,786